IPFS: The Decentralized Internet - Newsletter #223
A decentralized internet has the potential of reducing our society’s energy consumption while also making it significantly more difficult for technology to fail.
IPFS is the technology that makes the great majority of art NFTs possible. But what does else can it do? Why is it even necessary? How exactly does it work? Those are the very questions we wanted to answer in today’s newsletter.
IPFS: The Decentralized Internet
By Elliot Koss, Founder @ Future Mints
If you watched Silicon Valley, beginning in Season 4, the main character / entrepreneur Richard Hendricks was pursuing a brand new idea for a decentralized internet. They didn’t dive into the details except to highlight that it was incredibly technical and boring with an amazing scene where the main character disrupts a focus group to explain data sharding and a host of other intricate details.
If I do my job correctly, today, you’re going to feel like you’ve watched an episode of Silicon Valley and also come away knowing how many dicks you can jerk off in a given room. Though probably without laughing as much, because no one’s accused my writing of generating spontaneous, laugh out loud moments.
The decentralized internet is this concept where all the information on the internet could be shared on everyone’s devices a little at a time. So, let’s say that your phone is where 50 websites lived and my phone is where another 50 websites lived (depending on the website, the size required to store the code is fairly modest). Combined, we’d be able to access 100 websites. If we had a way for all the phones to connect with each other, we could all hold a fragment of the internet and share it with each other whenever we searched something. Pretty cool, right?
If you aren’t sold on this, then it either sounds like science fiction or a useless idea. If you think it’s science fiction, just hold on, and we’ll explain how this practically works and how close or far we are from it happening.
If you think it’s a useless idea - hello skeptic, welcome! You may still be unconvinced about blockchain technology, too. That’s okay. The great thing about technology is that it doesn’t require your belief or understanding to function. And the great thing about what we’re writing is that we want to help you understand its value, so here’s our best attempt at explaining why a decentralized internet matters:
A decentralized internet has the potential of reducing our society’s energy consumption while also making it significantly more difficult for technology to fail.
Energy consumption is the first key benefit. By reducing our society’s energy consumption, we may be able to reverse some of the negative impacts that we’re seeing in our world including this off-the-charts-hot summer. If you don’t believe that climate change is man-made, then perhaps you don’t think that there’s a benefit to reducing energy consumption, in which case, this entire line of reasoning won’t matter to you. Anyway, in addition to potentially addressing humanity’s greatest threat, reducing energy consumption (when it comes to the internet) also means that the cost of maintaining the internet may be lower.
You may think that this newsletter is free, and you’re right that you don’t pay for it. But it imposes a cost to Substack who hosts the newsletter and provides the email service. Also, your email service provider bears a cost. Both Substack and your email service provider offer a free service with either a Freemium (ie there’s a free and paid tier with the hope that you’ll find the service so useful that you eventually pay for it) business model or ad supported (ie they sell your data, in some manner, to target you with ads). No matter what, someone is paying for this newsletter, even if it isn’t you or me.
In a decentralized internet, instead of Substack and your email service provider paying for the costs of hosting and serving this newsletter, we’d all share a fraction of that cost with whatever technology we have in a manner that would cost fractions of a penny, a cost so low that you would barely feel the difference, which would result in a massive energy savings, because there wouldn’t be dedicated computers and databases required to power the internet. We would essentially reuse all of the devices that everyone is using to access the internet to also power and host the internet.
Now do you see how this is like Science Fiction?
At this point, you’re probably skeptical again. First, how is this possible? And second, if it’s possible, why hasn’t anyone done this already?
The second question is easier to answer, so let’s start there. Why hasn’t anyone done this already? They have. Just not at the scale that a decentralized internet can function like we’ve described, because it’s incredibly complex and difficult. The technology required to self-power the entire internet is massive, and it relies on infrastructure that hasn’t fully been built yet as well as capabilities that have only become possible with the invention of the blockchain.
Let’s talk about how this is even possible.
Some of you may be old enough to have used Napster back in the late 90s. It was a file-sharing service with the concept that you could download anything you wanted - movies, music, software, porn, you name it and they’d likely have it. And the best part was that it was all free. Of course, it was one of the big reasons that the music industry went into a freefall (who wants to buy a CD, the medium for music at the time, when you can download all the music for free) giving Apple’s iTunes the golden opportunity to create a simplistic music pricing model.
The innovative way that Napster worked was that instead of storing files in a central server, the files would be hosted on individual users’ machines and you would download them peer-to-peer (P2P). This allowed Napster to not actually store the illegal movies, music, software, or porn, and it made them difficult for the existing laws to handle. If they’d been hosting everything themselves, then the music copyright holders could have simply forced a court to shut Napster down (which is what eventually happened anyway). But this idea of simply giving people a way to share and access files on each other's machines was a sort of legal loophole.
As you can see, the concept of allowing people to access something while sharing where the data is stored is not new. And if this is making you feel a tad nostalgic, because you used Napster ‘back in the day’, I can sadly confirm that, yes, we are old.
But as you likely realize, this 20+ year-old technology didn’t usher in a decentralized internet, because there’s a critical technology gap that’s been missing in this equation that has prevented a decentralized internet from becoming reality. It has everything to do with how data is stored.
When you login to an app or website, your personal identifiable information (PII) along with all your activity in that specific platform is accessed for your account. There are legal requirements for how companies can manage, store, and handle your PII such as Europe's General Data Protection Regulation (GDPR) and the California Consumer Protection Act (CCPA), and the penalties for abusing your personal data are quite high. For instance, Facebook has been forced to pay hundreds of millions of dollars, perhaps even a few billion (who’s keeping track since this is a drop in the bucket compared to their profits, so were they really appropriately punished?) for their misuse of consumer data related to Cambridge Analytica and other privacy breaches, which is also part of what prompted GDPR and CCPA to come into existence.
The data required to power websites can be sensitive, with legal restrictions on its use and storage. This means that, legally, we can’t simply allow that data to be stored on everyone’s phone in this decentralized internet utopia without some protection mechanism. It’s illegal and companies would lose control of this incredibly valuable data.
If you’ve been paying attention, though, then these words likely sound familiar, because they’re the same concerns that blockchain directly solves. Personal and private data can be publicly encrypted in the blockchain, and only unencrypted for and by the owner of that data when they access it with their designated crypto wallet. This means that blockchains can store all the data of the internet in a secure and public manner while making it available to users of a decentralized internet.
By combining the concepts of distributed computing, hosting, and serving of the internet with blockchain’s encrypted and secure data storage, the decentralized internet is finally possible.
Which leads us to IPFS aka the Inter-Planetary File System. The IPFS is the decentralized internet. Or rather, it’s the protocol that is used for today’s version of the decentralized internet. Much like HTTP (HyperText Transfer Protocol) or HTTPS (the ‘s’ stands for ‘Secure’) is how you go to a website (https://google.com), IPFS is how you access the decentralized internet.
You can store websites on IPFS or images or videos - basically anything digital that you may want to store today on the internet.
At this point, you may be wondering: Why is this topic being introduced as a part of NFTs and Smart Contracts? Great question.
Remember how we discussed a couple weeks ago that the first use case that people became aware of NFTs was artwork? That artwork can be stored on a traditional website, which means that the digital artwork may get destroyed when a server is turned off. Or it can be hosted on IPFS which means that the artwork should always be available. Both of these options are examples of art being created off chain There’s a third option, where the artwork is generated directly on-chain by the smart contract (such as On Chain Monkeys), but we’ll discuss that another time.
The truth is that we’re still years away from all the technology coming together so that the decentralized internet could actually work. Some of the services for the decentralized internet are charging high fees, partly because there is no good way to spread all the data of IPFS on everyone’s device like I described above. That part is a tad science fiction today. But like everything else we’ve seen related to blockchain, we expect some enterprising entrepreneur (perhaps you!) to find a solution (and possibly make a billion dollars in the process).
By combining IPFS with Smart Contracts and NFTs, we’re taking important technology steps towards creating a new foundation that will power our world into the next generation while also improving our environmental footprint. It may not seem like it today, but the internet of the future is being built today to solve a wide variety of problems that exist at such a macro level that we don’t think about them as well as problems that most people weren’t even aware existed.
We can’t wait to dig further into NFT use cases, because the power of smart contracts, their NFT representations, and the decentralized internet is absolutely fascinating to nerds like us. Have a great weekend. We’ll see you in a week.
News of the Week
Global payments giant PayPal is entering the cryptocurrency market with its own U.S. dollar-pegged stablecoin, PayPal USD (PYUSD), the company announced on Monday. The Ethereum-based token will soon be available to PayPal users in the U.S, and marks the first time a major financial company is issuing its own stablecoin.
Early Thursday morning, DeGods revealed its plans for its “Season III” of the collection, which will add 20,000 new artworks to the collection. Not only will DeGods be adding female PFPs to the project that are swappable for male PFPs, but they will also be removing traits from NFTs that holders “don’t like” and adding new ones to replace them.
Inflows to Coinbase’s new Base blockchain were muted on the first day after its official launch, failing to meet the expectations of some crypto traders that massive amounts of capital would flow in. The chain only drew in $10M in the 24-hours after launch, compared to the nearly $170M already bridged to the chain.